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Ford has a $15 million Eurodollar loan maturing in 3 months that it plans to roll over for a further six months. The company treasurer

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Ford has a $15 million Eurodollar loan maturing in 3 months that it plans to roll over for a further six months. The company treasurer feels that interest rates will be higher in three months when rolling over the loan. Suppose the current 6-month LIBOR rate is 6.525% a) Explain how Ford can use an FRA at 6.75% from Banque Paribas to lock in a guaranteed six-month rate when it rolls over its loan in three months (e.g, buy/sell an FRA, underlying principle, what rate will apply, and when). b) In two months, 6-month LIBOR turned out to be 7%. How much will Ford receive/pay on its FRA

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